Everything You Need to Know About New York’s New FCA Guidance

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As we previously reported, New York City’s Fair Chance Act (FCA) went into effect on October 27, 2015. On November 5, 2015, the New York City Commission on Human Rights (NYCCHR or Commission) issued long-anticipated guidance on the FCA. Although the Commission’s website indicates that the guidance will be subject to future rulemaking, the guidance is effective as of November 5, 2015. The summary below is of the guidance as it currently stands.

Additionally, the Commission has issued a new version of their Fair Chance Notice form, which resolves some of the issues identified in our earlier analysis.

Scope of the FCA

According to the Commission’s guidance, the legislative intent of the FCA is to have employers analyze applicants on their merits rather than on their convictions, to “level the playing field” for individuals with a criminal record. (NYCCHR Legal Enforcement Guidance on the FCA, Page 1.) Thus, the FCA prohibits “any discussion or consideration of an applicant’s criminal history until after a conditional offer of employment.” (Page 2.) Employers, however, are not required to hire candidates whose convictions are directly related to the position in question or whose hiring would create an unreasonable risk; rather, employers are required to “ensure that individuals with criminal histories are considered based on their qualifications” before potential employers review their criminal records. (Page 2.) The FCA also requires employers to engage in a city-specific process prior to taking adverse action against an individual.

Although the FCA refers primarily to applicants, the guidance expands the scope of the FCA to current employees (by interpreting the term “applicant” to include both applicants and current employees). (Page 2.) Specifically, the guidance expands the scope of the FCA to include not only hiring, but “all terms and conditions of employment, including hiring, termination, transfers, and promotions.” (Page 2.) The effect of this expansion is unclear, given that a number of these decisions (e.g., promotions and transfers) occur only after actual employment (i.e., by definition, after a conditional offer of employment). That said, employers should strongly consider engaging in a New York Correction Law Article 23-A analysis and the “Fair Chance Process,” described below, any time they consider taking an adverse action against a New York City employee based on a criminal background check, even though the process is more logically applicable to applicants.

The FCA’s Criminal Background Check Process

The Commission’s guidance posits that the FCA does not change what criminal history information employers may consider as that already is governed by Article 23-A; rather, it changes only when employers may consider the information. (Page 4.) While this may be true, the guidance also creates a new framework for background checks that requires significant modifications to the general federal Fair Credit Reporting Act approach and Article 23-A state law approach that most employers use. This new New York City process is as follows.

a. Prohibitions Prior to a Conditional Offer

Employers are prohibited from the “discovery and use” of criminal history before a conditional offer of employment. (Page 4.) This prohibition covers seeking or obtaining information about an applicant’s criminal history prior to making a conditional offer of employment. (Page 4.) Specifically, the guidance addresses the following pre-offer scenarios:

Solicitations, Advertisements, and Employment Applications: Employers may not identify limitations for employment positions related to an individual’s criminal conviction history on solicitations, advertisements, employment applications, or similar materials. (Pages 4-5.) For instance, employers may not use advertisements stating, “no felonies,” “background check required,” or “clean records only.” (Page 5.) These prohibitions apply to a broad swath of materials, including applications, fliers, handouts, online postings, and job fair materials. (Page 5.) For instance, employment applications may not include questions regarding an applicant’s criminal history (including any pending criminal cases). (Page 5.) Significantly, employers may not even solicit background check disclosure and authorization forms or screens before making a conditional offer. Employers may comply with this new New York City prohibition in a variety of ways particular to each organization’s situation.

Interview Process: Employers may not make any inquiries or statements related to an applicant’s criminal history until after making a conditional offer of employment. (Page 5.) Examples of prohibited conduct include:

Making statements (in writing or orally) that individuals with convictions or certain convictions will not be hired or cannot work for an employer;

Investigating an applicant’s criminal history (whether through a public records database or through a third party).

While this prohibition on investigations would not prevent employers from conducting general Internet searches on an individual (e.g., through Google or on LinkedIn), it would prohibit running web searches using terms such as “arrest,” “mugshot,” “warrant,” “criminal,” “conviction,” “jail,” or “prison.” (Page 5.)

The guidance also allows an applicant to refuse to answer any prohibited question or inquiry without being disqualified from prospective employment. (Page 5.)

Inadvertent Disclosures by Applicant: Inadvertent disclosures of criminal record information by an applicant before an employer has made a conditional offer, do not, by themselves, create liability for an employer. (Page 5.) Employers interacting with an applicant who inadvertently discloses information, however, should not use such a statement as an opportunity to explore the applicant’s criminal record further; rather, employers should state that, by law, they may consider an applicant’s record only if they decide to extend a job offer to the applicant. (Page 5.) Likewise, an employer that is asked whether it will conduct a background check may state that it will only after it makes a conditional offer of employment (at which point the guidance advises employers to move the conversation to a different topic). (Page 5.) Importantly, employers that make a good faith effort to exclude criminal history information that an applicant discloses prior to when an employer makes a conditional offer will not be liable under the FCA. (Page 5).

b. The Definition of “Conditional Offer”

The guidance defines a conditional offer as an offer of employment that can be revoked based only on the following information:

the results of a criminal background check;

the results of a medical examination in situations in which such exams are permitted by the Americans with Disabilities Act; or

other information the employer could not have reasonably known before the conditional offer if, based on the information, the employer would not have made the offer, and the employer can show the information is material to job performance.

For temporary help and staffing firms, the guidance defines a conditional offer as the offer to be placed in a pool of applicants from which the applicant may be sent to temporary positions. (Page 2.)

c. Prohibitions After a Conditional Offer

Once an employer has extended a conditional offer of employment to an applicant, it may make all the same types of inquiries into an individual’s criminal history as it could before the FCA went into effect. So, for example, an employer may ask an individual about convictions or run a background check. (Page 6.) However, an employer is prohibited from inquiring about or acting on non-conviction information (e.g., sealed or expunged records; violations, infractions, or other petty offenses; youthful offender or juvenile delinquency findings; or withdrawn pleas after the completion of a court program). (Page 6.)

d. Withdrawal of a Conditional Offer of Employment

An employer may withdraw a conditional offer of employment based on an individual’s criminal background, but must comply with a specific pre-adverse action process unique to New York City. This process (which is in addition to federal and non-New York state requirements) includes two phases—the Article 23-A Evaluation and the “Fair Chance Process.”

i. Article 23-A Evaluation

Before withdrawing a conditional offer of employment, employers first must conduct an Article 23-A analysis under New York State law. While the Article 23-A requirements are not new, the Commission has explained in the guidance how those requirements are to be incorporated into the new process imposed by the FCA. Under N.Y. Correction Law § 752, an individual may not be denied employment on the basis of a previous criminal conviction unless (1) there is a “direct relationship” between the criminal offense and the job or (2) employment would involve an “unreasonable risk” to property or to the safety or welfare of the general public.

(1) “Direct Relationship” Prong. In order to meet the “direct relationship” prong of the Article 23-A evaluation, an employer must first establish a connection between the nature of the conduct that gave rise to a conviction and the potential position. (Page 6.) If an employer can establish such a connection, it must then evaluate eight Article 23-A factors to see if they mitigate the concerns raised by the connection. (Page 6.) Interestingly, the Article 23-A factors identified by the Commission differ in substance from those set forth in state law. The Commission’s eight factors along with deviations from the state’s version of these factors are:

the state’s public policy, which encourages the employment of persons with criminal records;

the specific duties and responsibilities of the job;

the bearing, if any, of the person’s conviction history on his or her fitness or ability to perform one or more of the job’s duties or responsibilities;

the time that has elapsed since the events that led to the applicant’s criminal conviction and not the time since the arrest or conviction;

[Note that this New York City approach measures time from the date of the underlying criminal act, whereas some New York courts have measured time from the later date of conviction.]

the age of the applicant when the events that led to his or her conviction occurred, not the age at the time of the arrest or conviction;

[Note that this New York City approach measures time from the date of the underlying criminal act, whereas some New York courts have measured time from the later date of conviction.]

the seriousness of the applicant’s conviction history;

any information produced by the applicant, or produced on the applicant’s behalf, regarding his or her rehabilitation or good conduct; and

the legitimate interest of the employer in protecting property and the safety and welfare of specific individuals or the general public.

(Page 7.)

Additionally, employers must consider any certificates or relief from disabilities or certificates of good conduct, which create a presumption of rehabilitation with regard to the conviction in question. (Page 7.)

(2) “Unreasonable Risk” Prong. In order to establish that employment would involve an “unreasonable risk” to property or to the safety or welfare of the general public, an employer must begin by assuming that a risk does not exist and then show how the eight Article 23-A factors combine to create an unreasonable risk. (Page 7.)

An employer must solicit information related to each of these factors from an applicant upon extending a conditional offer and learning of an applicant’s criminal record. (Page 7.) An employer may not ignore evidence favorable to an individual. (Page 8.) Moreover, employers must evaluate each of the eight Article 23-A factors and may not weigh one factor as disproportionately significant. (Page 8.)

ii. The Fair Chance Process

If, after completing the Article 23-A analysis, an employer wishes to withdraw a conditional offer of employment, the employer must engage in a new “Fair Chance Process.” The “Fair Chance Process” requires employers to take the following actions:

Provide the applicant with a written copy of the inquiry into that individual’s criminal history. This written copy would include every piece of information upon which the employer relied to determine whether the individual had a criminal history. (Page 8.) These documents should contain a date stamp showing the date and time the employer accessed the information. (Page 8.) The written copy should include oral information and the source of the information and should also identify participants to the conversation. (Page 8.)

Provide the applicant with a written copy of the Article 23-A analysis. An employer either may use the Fair Chance Notice form provided by the Commission or a form of the employer’s choosing, so long as the material substance of the form does not change. (Page 9.) According to the guidance, boilerplate denials that simply list the Article 23-A factors violate the FCA. (Page 9.)

On November 5, 2015, the Commission released an updated version of the Fair Chance Notice form, which resolves many of preliminary issues raised in our October 27 analysis. For example, the form no longer contains a “Submit” option, so employers can use the new version of the form without worrying about inadvertently submitting the form to the Commission.

Allow the applicant three business days, from the receipt of the inquiry and analysis to respond. During this three-business-day period, the applied-for position must be kept open (e.g., another person may not be permanently placed in the position in question). (Page 9.) This period runs from the applicant’s receipt of the inquiry and analysis. Therefore, the Commission recommends disclosing this information to the individual in person, electronically, or by registered mail (so long as the method is mutually agreed upon in advance). (Page 9.) If the individual provides additional information (either orally or in writing) in response, the employer must consider whether this new evidence changes the initial Article 23-A analysis. (Page 9.) If the employer makes a final decision to withdraw the conditional offer, the employer must inform the applicant of the decision. (Page 9.) The guidance also contains detailed requirements for responding to erroneous reports.

Per Se Violations under the FCA

The guidance lists examples of several separate, chargeable violations of the FCA. (Page 4.) These include:

Declaring, printing, or circulating—or causing the declaration, printing, or circulation of—any solicitation, advertisement, or publication for employment that states any limitation or specification regarding criminal history, even if no adverse action follows.

Making any statement or inquiry for the purposes of obtaining an applicant’s criminal history before a conditional offer of employment, even if no adverse action follows.

Withdrawing a conditional offer of employment based on an applicant’s criminal history before completing the Fair Chance Process.

Taking an adverse employment action based on an applicant’s non-conviction.

FCA Exemptions

The FCA provides for a number of exemptions. However, the guidance warns that they are “to be construed narrowly.” (Page 10.) These exemptions include:

Employers hiring for positions where federal, state, or local law requires criminal background checks or bars employment based on certain criminal convictions. While this exemption covers mandatory requirements, it does not apply if the applicable law simply allows an employer the discretion to exclude an individual from employment due to a conviction. (Page 11.) The FCA still does apply when an employer hires individuals who require licensure, even when the license has mandatory barriers or prohibitions related to background checks. (Page 11.) For positions requiring licensure, an employer may ask whether the applicant has the applicable license but not about background related to the license. (Page 11.)

Employers required by a self-regulatory organization to conduct criminal background checks of regulated persons. This exemption appears to cover employers in the financial services industry, though the guidance warns that the exemption applies only to “covered positions.” (Page 11.) Employment decisions for other “non-covered positions” must still comply with the FCA. (Page 11.)

Any employer claiming an exemption carries the burden of establishing its applicability. (Page 10.) Employers claiming exemptions should inform applicants of the applicable exemption and keep an exemption log for a period of five years. This log should include:

which exemption is claimed;

how the exemption applies to the position in question (identifying the specific law or rule governing the exemption, if applicable);

a copy of the inquiry and the name of the employee who made it;

a copy of the employer’s Article 23-A analysis (including the names of the employees who participated in it); and

the final employment action taken.

(Page 12.)

Enforcement and Damages

The Commission will be reviewing an employer’s adverse action decisions to ensure compliance with the new FCA process. (Page 7.) However, the guidance does not indicate whether this will be done in response to claims of discrimination or on a random or other basis.

The Commission says it will vigorously enforce the FCA and will assess civil penalties based on the following factors:

The severity of the violation;

Additional or previous violations;

The size of the employer, including the total number of employees and revenue; and

Whether the employer knew or should have known about the FCA.

(Page 13.)

Violations of the FCA may also result in additional damages including back pay and front pay, compensatory damages, and punitive damages. (Page 13.)

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